Trial pits tiny home CEO against customer whose deposit was taken
A decide in Centennial is weighing whether or not the only real proprietor of a tiny dwelling development firm may be held personally answerable for the alleged theft of a buyer’s deposit.
His determination would be the first courtroom verdict concerning Holy Floor Tiny Properties in Englewood, which took $6 million in deposits from 180 prospects who by no means obtained homes. Final yr, an investigation discovered that a few of the money was spent on journeys to Las Vegas, limousine rides, spas and two dozen autos. Another cash couldn’t be accounted for.
Matt Sowash is owned and operated by Matt Sowash, who served almost two years in jail within the 2000s for stealing $470,000 from buyers in a poker league and Vegas poker event. On Monday, Sowash fielded questions on Holy Floor from the witness stand.
“Holy Floor used this cash for some objective apart from the development of a home, isn’t that proper?” lawyer Paul Grant requested about one buyer’s deposit.
“Simply the overall operations of the enterprise,” Sowash testified below oath.
“However you’re undecided, are you? You possibly can’t say the place this $35,000 went, proper?”
“That’s proper,” Sowash conceded.
Grant represents a North Carolina girl named Morgan Daniels, who additionally testified at Monday’s half-day civil trial. She paid a 100% deposit of $35,248 to Holy Floor in 2021 and was promised her tiny dwelling would arrive in six months. It didn’t, she demanded a refund, obtained $11,000 again after which sued Sowash for theft when she was denied the remaining.
“You approved a visit to Las Vegas for you and Holy Floor staff, is that proper?”
“Sure,” Sowash responded, claiming it was one journey for 18 staff that price $20,000. Final yr’s investigation discovered a number of Vegas journeys costing about $55,000.
“You could possibly have used that $20,000 to repay Ms. Daniels however you selected to not, proper?”
“I selected to offer our staff a profit, sure,” Sowash informed Grant.
Sowash defended spending his prospects’ deposits on two dozen autos — six bikes, three race vehicles, three classics from 1959 and a limo amongst them — by explaining that Holy Floor was operating a aspect enterprise as a used automotive dealership. Buyer deposits are used for common enterprise operations, not development of particular properties, he mentioned.
Sowash additionally claimed that the deposits may not have been deposits in any respect however moderately investments and even donations, since Holy Floor was initially established as a Christian ministry. (After submitting for chapter, it agreed to transform to an organization).
“It’s a donation in the event you give cash to a nonprofit,” Sowash testified Monday morning.
Daniels, testifying just about, was requested, “Did you make a donation to Holy Floor?”
“I didn’t,” she mentioned from her dwelling in North Carolina.
“What did you suppose you had been paying for once you paid Holy Floor $35,000?”
“A tiny home,” Daniels defined, after which added, “My tiny home, particularly.”
When requested by his personal lawyer, Brian DeBauche, why Holy Floor slid hundreds of thousands of {dollars} into debt and filed for chapter in fall 2022, Sowash blamed BusinessDen’s reporting in August 2022 that the corporate was taking deposits and never delivering properties.
DeBauche famous that Daniels is a creditor within the chapter case. Underneath a plan accepted by a chapter decide earlier this yr, Holy Floor is meant to make quarterly funds to her and 180 different prospects totaling $3.8 million over 5 years, and beginning quickly.
“There isn’t a assure that any collectors, together with Ms. Daniels, can be paid a cent, right?” Grant requested Sowash whereas he was on the witness stand this week.
“I’ve to start out making funds to all collectors in July and that’s what I’m going to do.”
Within the meantime, Arapahoe County District Courtroom Decide Don Toussaint expects to resolve within the subsequent week or two whether or not Sowash stole $24,000 from Daniels. If he did, Sowash can be ordered to pay 3 times the quantity that he took below the state’s civil theft statute.
“He used Ms. Daniels’ cash for another objective,” Grant informed the decide throughout closing arguments Monday. “Mr. Sowash doesn’t even know what it was used for as a result of they didn’t maintain monitor. Apparently they simply put it in an account and used it for no matter.”
“However it doesn’t actually matter the way it was used,” Grant claimed a short while later. “What issues is that it was used inconsistent together with her intentions for that cash.”
DeBauche argued in any other case. Daniels’ deposit, which he known as “an funding in a ministry,” have to be refunded however there isn’t a time restrict on that refund, he mentioned. And since Sowash didn’t personally profit from the deposit, he can’t be held liable, DeBauche mentioned.
“Ms. Daniels’ treatment is towards the corporate,” he mentioned. “Totally towards the corporate.”
This story was reported by our associate BusinessDen.